Baud v. Carroll, 2011 U.S. App. LEXIS 2182 (6th Cir. Mich. 2011)

Charles J. Schneider

Case Conclusion Date:February 4, 2011

Practice Area:Bankruptcy / Chapter 13

Outcome:Reversed

Description:The U.S. District Court for the Eastern District of Michigan held the applicable commitment period (ACP) was 60 months for above-median-income debtors, but the requirement did not apply because the debtors had negative projected disposable income. It reversed a bankruptcy court order sustaining a Chapter 13 trustee's objection that it should be extended to 60 months, and remanded to allow the debtors to modify their plan. The trustee appealed.Congress had not provided that the ACP was a multiplier for determining payments to unsecured claims, thus, the temporal approach was adopted: due to the positive projected disposable income (PDI) and objection, all PDI to be received in the ACP had to be applied for payments over a duration equal to 11 U.S.C.S. § 1325(b)'s ACP. Items such as Social Security benefits excluded under 11 U.S.C.S. § 101(10A)'s definition of current monthly income, and other expenses above-median-income debtors could deduct had to be deducted; including them would read out disposable income's revised definition. Section 1325(b)(3) clearly allowed for a mortgage payment deduction, absent some other basis, other than the disposable-income test, for disallowance. Excluding the benefits and deducting mortgage payments resulted in a negative PDI. Under § 1325(b)(4)(B), confirming a plan of less than 3 or 5 years, respectively, was permissible only if unsecured claims were paid in full over a shorter period. To ensure creditors were paid the maximum amount affordable, § 1325(b)(1)(B) required all PDI be applied to payments over a duration equal to the ACP, whether the PDI was negative, zero, or positive.

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